Does a subject-to deal actually make sense when the seller has a second lien they forgot to mention until two days before closing

A HELOC (home equity line of credit) is a second loan the seller took out using the house as collateral. It sits behind the first mortgage in priority, meaning the first lender gets paid before the HELOC lender if the property ever sells or goes through foreclosure. Your title search caught it, which is exactly what title searches are for.

On whether the credit union will talk to you: they probably will not negotiate directly with you because you are not the borrower. The seller is. What can happen is the seller calls the credit union and asks for a payoff quote, and separately asks whether they would accept a short payoff, meaning less than the full $9,100. Credit unions sometimes do this on seasoned HELOCs, especially when the alternative is a distressed sale with unclear proceeds. I cannot tell you they will say yes, and nobody can. It depends on the credit union's policies, the account history, and how the request is framed.

Your other paths at closing are straightforward to name: pay the HELOC in full, negotiate it down through the seller, or walk away. Some buyers also structure a payment plan into the purchase agreement where the seller credits back part of their equity payment to cover the second, which rearranges the same dollars without adding new cash. Whether that math still works is specific to your numbers.

The thing worth knowing before you decide: confirm with a real estate attorney in New Mexico whether you can take the deed subject-to with the HELOC still open, because a second lien that stays open after transfer creates its own exposure. That question needs a licensed answer, not forum input.

What is the seller willing to do on their side of this? That probably determines whether the deal survives more than anything the credit union does.

The assumption doing the most work in your original underwriting was that $14k was the total equity cost. The HELOC resets that to $23k+, and the question is whether the asset still justifies that number at a 3.2% carry.

On the HELOC negotiation: credit unions will sometimes discount a HELOC to settle it, but that typically requires the borrower to request hardship consideration, not a third-party buyer. You are not the borrower, so you have no standing to call that lender and negotiate directly. What you can do is work through the seller. She is the account holder. If she is genuinely distressed, the credit union may settle for less than the $9,100 balance, but the seller has to initiate that conversation, and it will take time you may not have at two days out. A real estate attorney in New Mexico can structure an authorization that lets you communicate on her behalf in some limited capacity. Get one involved today, not after closing.

The operational risk you have not named: HELOCs from 2021 may still be in their draw period or just entering repayment. If the balance is accruing and the seller has been ignoring it, you could be looking at a lien that grows before you can extinguish it. Confirm the current payoff figure in writing, not just the statement balance.

Two paths worth modeling. First, negotiate the HELOC down through the seller, extend the closing timeline, and re-run the deal at whatever the actual all-in cost becomes. Second, price the deal as a $23k equity purchase and decide whether the 3.2% rate still makes the asset worth holding at that number given your East Mesa comps and your exit.

The due-on-sale exposure on the first does not change, but adding an unresolved second lien before you take the deed is a separate problem that has to be cleared at closing regardless.

What is the property's current market value, and what was your original hold or exit plan?

The credit union will almost certainly not negotiate the HELOC balance down with you, because the loan is current and you have no standing as a third party to initiate a short payoff conversation. Short payoff talks happen when a lender faces a loss, and a $9,100 current HELOC on a house with enough equity to attract a sub-to buyer is not that situation.

The checklist a careful operator runs here: confirm the HELOC balance and payoff figure in writing from the credit union directly, not just the title search number, because accrued interest and fees can move it; check whether the HELOC has a draw period still open, because an open line means the seller could theoretically draw against it after you take the deed and before you close the line; verify the due-on-sale clause exposure on the first separately from the HELOC, since the credit union holding the second is a different entity that may send its own acceleration notice when the deed records; and get a lien subordination or full payoff commitment in writing before you record anything.

The real reframe on your numbers: if the first is genuinely at 3.2% and the house cash-flows or appreciates enough to justify $23k all-in instead of $14k, the deal may still work, it just works differently than you modeled it. What does the ARV look like against that all-in number, and what was your original exit or hold strategy?

Credit unions occasionally settle seconds at a discount when the account is delinquent; a current HELOC at full balance is a different conversation and they have little incentive to move.

Confirm the HELOC balance and whether it's still drawable before anything else.

Call the credit union's loss mitigation or lien release desk and ask specifically whether they will negotiate a payoff discount given the seller's equity position, because credit unions do sometimes settle junior liens below face value when the first is current and the borrower requests a release, though you need the borrower on that call since you have no standing as a third party yet. The number worth testing first is whether $9,100 reflects the full drawn balance or just a portion of the line, because if she only drew $4k and the statement shows $9,100 with fees and interest, the negotiable figure is different than if she drew the whole line. A short payoff request through the seller, not you, is the mechanism, and the credit union decides in days, not weeks. If they hold firm at $9,100, the deal math shifts to whether $23k all-in still clears your target spread on a 3.2% assumable first, which is the only reason left to stay at the table. What is the current payoff on the first?

The number I need is whether the HELOC is still in draw period or has converted to repayment, because that changes what you can actually do with it before closing. A HELOC in repayment with a fixed monthly obligation can sometimes be subordinated and left in place behind the first, meaning you take the deed subject-to both liens, pay the HELOC monthly as part of your carry, and the $9,100 becomes a debt service line rather than a closing cost. A credit union in draw period is harder, because the line is technically open and revocable, and they have less incentive to sit still while the borrower transfers title to someone who is not on their membership roster. The seller is still the borrower in either scenario, which is the mechanical fact that limits your negotiation access, but she can call them directly and ask whether they would accept a payoff discount or freeze the line in exchange for a subordination agreement, and you can put the cost of that call on her as a seller obligation in your amendment.

What is the current monthly payment on the HELOC if it has converted, and do you know the maturity date?